Where Are We Investing Now: Consumer Goods

Photo by  Artem Bali  on  Unsplash

Photo by Artem Bali on Unsplash

Both of our fund families focus on consumer products. Social Starts takes the angle of commerce and focuses on Digitally Native Brands based purely on their market characteristics. Joyance focuses on consumer goods derived from deep science with high emotional content.

Social Starts focuses on Digitally Native Brands with the potential to deliver a generational opportunity based on a massive shift in global consumption habits.  The Internet has disintermediated everything about consumer goods; from access, to raw materials, to direct communication with consumers.  At the same time, the rising generation has made it clear that they prefer screens--especially on their phones--as the way to buy everything that matters. This combination opens new paths for early startup success. Companies can get products to market more quickly and efficiently, thus finding an eager population of early customers, and so, quickly grow revenues. 

The consumer goods solutions/products we seek should have these attributes:

  • Sold online primarily; omni-channel is recognized as an inflection point at the Series A.

  • Can be micro-manufactured and ship well, preferably using new tech materials.

  • Allow for a type of product design or economics not feasible in the traditional channel.

  • Have high customer lifetime value.

  • Deliver high gross margins.

  • Display a strong propensity to be shared via social media or garner earned media.

  • Show product timelessness; not subject to fast or seasonal product shifts.

 The categories we believe have the greatest health and happiness potential right now are:

  • Cosmetics/Anti-aging. Emphasis on lab-grown cosmetics.

  • Food. Special focus on DNA, biome-based nutrition, and lab-grown foods.

  • High consumption beverages. Most prominently water; special focus on innovation in coffee and tea.

  • Supplements/Vitamins. Only where derived from deep science and where personalization is front and center.

  • Sexual Wellness/Contraception. A natural arena where the brain and body combine to provide joy.

  • Baby Care. Includes both services and physical goods.

  • Pet Products. Special emphasis on next-generation pet nutrition.

The best consumer products companies will show these characteristics early:

  • They deliver affordable luxury (aspirational).

  • Product cost is over $40 (don’t compete with Walmart), but under $1000 (repeat customers = swoon).

  • They are custom products mass produced.

  • In some fashion, they deliver a technological advantage.

  • They are early on: very few SKUs.

In addition to the products/services themselves, we are actively seeking Community, Manufacturing and Distribution services for these categories. How do any of these science-based, personalized products get to their markets? How are the customer relationships reinforced?

This is a golden era for digital commerce. There will be many great companies created, but most won’t be 10x venture opportunities. The massive winners could come from any category. At inception, they will be marked by tight end-to-end control of the sourcing, manufacture, distribution and sales process. But, over time, the big winners will always become global, omni-channel brands. The key to becoming a massive brand will be the nature and timing of that omni-channel expansion.

By Managing Partner Mike Edelhart